L&T: Margin woes cloud Q3 positives

Shares of engineering giant Larsen & Toubro Ltd hit a 52-week high of ₹3,737.90 apiece on Tuesday on new order wins. But the excitement fizzled out on Wednesday after the third-quarter operating performance of L&T’s core engineering and construction (E&C) business disappointed.

- Dipti Sharma & Harsha Jethmalani

Margin fell 90 basis points year-on-year to 7.6%, missing analysts’ expectations. Execution of legacy orders secured in FY21 and the first half of FY22, and the issue of new orders still not achieving a margin recognition threshold, led to weak core margin.

E&C margin has been in low single digits in the previous three quarters, and the pain may not be over yet. L&T has lowered its E&C margin guidance range to 8.25-8.5%, from 8.5-9%. Although the cut in the guidance is not sharp, it was enough for investors to cream off profits, dragging the stock down by 4% on Wednesday.